Nestle India Limited: Maggi Noodles at War with the Regulators SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
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Case Study Description of Nestle India Limited: Maggi Noodles at War with the Regulators
On May 21, 2015, food inspectors in the North Indian state of Uttar Pradesh tested Maggi instant noodles that had been manufactured by NestlA? India Limited. Their results led them to declare that the samples contained higher-than-permissible levels of monosodium glutamate and lead - substances that could, at those levels, potentially cause harm to consumers. The well-known brand accounted for 26 per cent of NestlA? India Limited's annual revenue, and the subsequent recall was a source of controversy. The recall was one of the biggest business stories of the year in India and was estimated to have cost NestlA? India Limited US$50 million. The company's response to the problem ranged from inaction and denial to attempts at rectification and redemption. The overall actions of the company were characterized by confusion regarding product safety and contradictory statements about the accusations that had been made against it. Given the material losses and the damage to both the Maggi and NestlA? India brands, the company wanted to know how the situation could be corrected - and avoided - in the future. Was the Food Safety and Standards Authority of India correct to recall Maggi noodles? Once the crisis was in motion, how could NestlA? India Limited have handled the situation to appease customers, regulators, and stakeholders? Harvinder Singh is affiliated with Institute of Management Technology, Ghaziabad. Rashmi Kumar Aggarwal is affiliated with Institute of Management Technology (IMT). Rajinder Kaur is affiliated with Panjab University.
Tags :: Crisis management, International business, Public relations, Strategy, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "Nestle India Limited: Maggi Noodles at War with the Regulators" written by Harvinder Singh, Rashmi Kumar Aggarwal, Rajinder Kaur, Rita Ghial includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nestla Maggi facing as an external strategic factors. Some of the topics covered in Nestle India Limited: Maggi Noodles at War with the Regulators case study are - Strategic Management Strategies, Crisis management, International business, Public relations, Strategy and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Nestle India Limited: Maggi Noodles at War with the Regulators casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, etc
Introduction to SWOT Analysis of Nestle India Limited: Maggi Noodles at War with the Regulators
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nestle India Limited: Maggi Noodles at War with the Regulators case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nestla Maggi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nestla Maggi operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nestle India Limited: Maggi Noodles at War with the Regulators can be done for the following purposes –
1. Strategic planning using facts provided in Nestle India Limited: Maggi Noodles at War with the Regulators case study
2. Improving business portfolio management of Nestla Maggi
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nestla Maggi
Strengths Nestle India Limited: Maggi Noodles at War with the Regulators | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nestla Maggi in Nestle India Limited: Maggi Noodles at War with the Regulators Harvard Business Review case study are -
Successful track record of launching new products
– Nestla Maggi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nestla Maggi has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Nestla Maggi has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Nestle India Limited: Maggi Noodles at War with the Regulators - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Leadership & Managing People field
– Nestla Maggi is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Nestla Maggi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Nestla Maggi are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Nestla Maggi is one of the leading recruiters in the industry. Managers in the Nestle India Limited: Maggi Noodles at War with the Regulators are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Nestla Maggi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nestla Maggi has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Nestla Maggi is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Harvinder Singh, Rashmi Kumar Aggarwal, Rajinder Kaur, Rita Ghial can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Nestla Maggi has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Nestla Maggi is present in almost all the verticals within the industry. This has provided firm in Nestle India Limited: Maggi Noodles at War with the Regulators case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Nestle India Limited: Maggi Noodles at War with the Regulators Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Nestla Maggi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nestla Maggi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Nestla Maggi in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Nestle India Limited: Maggi Noodles at War with the Regulators | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nestle India Limited: Maggi Noodles at War with the Regulators are -
Slow to strategic competitive environment developments
– As Nestle India Limited: Maggi Noodles at War with the Regulators HBR case study mentions - Nestla Maggi takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Interest costs
– Compare to the competition, Nestla Maggi has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of Nestla Maggi, firm in the HBR case study Nestle India Limited: Maggi Noodles at War with the Regulators needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Nestla Maggi products
– To increase the profitability and margins on the products, Nestla Maggi needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nestle India Limited: Maggi Noodles at War with the Regulators, in the dynamic environment Nestla Maggi has struggled to respond to the nimble upstart competition. Nestla Maggi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Harvinder Singh, Rashmi Kumar Aggarwal, Rajinder Kaur, Rita Ghial suggests that, Nestla Maggi is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Increasing silos among functional specialists
– The organizational structure of Nestla Maggi is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Nestla Maggi needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nestla Maggi to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nestle India Limited: Maggi Noodles at War with the Regulators, is just above the industry average. Nestla Maggi needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Nestla Maggi has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Nestla Maggi has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, Nestla Maggi has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Nestla Maggi even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Opportunities Nestle India Limited: Maggi Noodles at War with the Regulators | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Nestle India Limited: Maggi Noodles at War with the Regulators are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Nestla Maggi can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nestla Maggi in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Nestla Maggi can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Using analytics as competitive advantage
– Nestla Maggi has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Nestle India Limited: Maggi Noodles at War with the Regulators - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nestla Maggi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nestla Maggi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nestla Maggi can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nestla Maggi can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Nestla Maggi can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Loyalty marketing
– Nestla Maggi has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Nestla Maggi can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nestla Maggi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nestla Maggi is facing challenges because of the dominance of functional experts in the organization. Nestle India Limited: Maggi Noodles at War with the Regulators case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nestla Maggi can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nestla Maggi to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nestla Maggi to hire the very best people irrespective of their geographical location.
Threats Nestle India Limited: Maggi Noodles at War with the Regulators External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nestle India Limited: Maggi Noodles at War with the Regulators are -
Shortening product life cycle
– it is one of the major threat that Nestla Maggi is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Nestla Maggi needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nestla Maggi can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Increasing wage structure of Nestla Maggi
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nestla Maggi.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Nestla Maggi has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Nestla Maggi needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Nestle India Limited: Maggi Noodles at War with the Regulators, Nestla Maggi may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Regulatory challenges
– Nestla Maggi needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nestla Maggi business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nestla Maggi can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Nestla Maggi demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Nestla Maggi high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nestla Maggi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nestla Maggi in the Leadership & Managing People sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Nestle India Limited: Maggi Noodles at War with the Regulators Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Nestle India Limited: Maggi Noodles at War with the Regulators needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Nestle India Limited: Maggi Noodles at War with the Regulators is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Nestle India Limited: Maggi Noodles at War with the Regulators is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Nestle India Limited: Maggi Noodles at War with the Regulators is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nestla Maggi needs to make to build a sustainable competitive advantage.
